There’s nowhere to hide (except in hard assets)
The central planners are in a state of fear and panic. They are trying everything and anything to create market validation for their policies, watching with trepidation as their favored economic metrics fail to respond to all of their frenzied efforts.
They are so far over the tips of their skis right now that there’s nothing they won’t do.
In short, everything the central planners have tried has failed to bring widespread prosperity and has instead concentrated it dangerously at the top. Whether by coincidence or conspiracy, every possible escape hatch for 99.5% of the people has been welded shut. We are all captives in a dysfunctional system of money, run by a few for the few, and it is headed for complete disaster.
To understand why, in all its terrible and fascinating glory, we need look no further than Japan.
Japan is really in no better or worse shape than the rest of the developed world. But is a few chapters further along in the story, which means it holds both explanatory and predictive power for most of the developed nations.
This is why we should study it closely:
Here is the net result of central banks pursuing quantitative easing and zero-interest rates: a massive increase in global risks resulting from the carry trades the money expansion and cheap rates fueled.
The central banks’ “solution” has blown another global bubble of risk that now threatens to destabilize not just the carry trades but the economies and credit systems that have become intertwined with the carry trade.
In effect, the failure to address the structural problems revealed in the Global Financial Meltdown of 2008-2009 have been transferred to the larger foreign-exchange (FX) market, which is connected to virtually everything in the global economy.
Last week was downright horrific for precious metals owners. Hours after silver broke below $16/oz, Peak Prosperity’s Chris Martenson recorded this MUST LISTEN interview with silver expert Ted Butler on the causes of the prolonged abuse in the the precious metals sector, and how close we may be to its end.
Butler zeroes in on the heart of the issue: unfairly concentrated positions within the derivatives market, and makes the case for a near-term MONSTER RALLY in silver:
Look, it’s really this simple: Anything that can’t go on forever, won’t.
This week gold and silver were pushed below their previous “higher low”; gold dropped below its 1240 support, and silver was forced below 18.70. From a technical chart perspective, this has just invalidated the uptrend for PMs in 2014, which will probably bring on more selling pressure for PMs.
Is a big drop coming on tonight’s Asian open?
For close to 300 years, inflation in the US remained very subdued. Small spurts occurred around major wars (Revolutionary, Civil, WW1, etc), but after each, inflation quickly trended back down to its long-term baseline. If you lived during this stretch of time, your money had roughly the same purchasing power your great-grandfather’s did.
But something changed after inflation spiked yet again during World War 2. With the permanent mobilization of the military industrial complex and the start of the decades-long Cold War, combined with a related acceleration in government deficit spending, inflation did not come back down. It remained elevated, and in fact, rose further.
That is, until the “Nixon shock” in 1971, when the dollar’s remaining ties to gold were severed. Then inflation EXPLODED. And the inflationary moon-shot has continued since, up to present day.
Kirk Sorenson returns this week to relay what has happened in the thorium space.
The East, most notably China, is now fully-mobilized around getting its first reactor operational by as soon as 2020. If indeed thorium reactors are as successful as hoped, the US will find itself playing catch up against countries who suddenly hold a tremendous technology advantage:
The current bubbles in financial assets — in equities and bonds of all grades and quality — raging in every major market across the globe are no accident. They are a deliberate creation. The intentional results of policy.
Therefore, when they burst, we shouldn’t regard the resulting damage as some freak act of nature or other such outcome outside of our control. To reiterate, the carnage will be the very predictable result of some terribly shortsighted decision-making and defective logic.
Blame can and should be laid where it belongs: with the central banks.
In danger of dying from too much debt.
Today, the world economy is in uncharted territory.
Never before has the developed world carried this much debt.
Never before have the central banks of those same countries expanded their balance sheets so much.
Never before has so much sovereign debt been outright monetized. Never before have major financial institutions been officially designated as “too big to fail” and thereby been granted special license to assume gigantic risks.
Dr. Lacy Hunt, economist and current executive vice president of Hoisington Investment Management Company, expects the macroeconomic situation to get worse from here:
This week gold joined silver in breaking down, setting a new cycle low, and selling off relatively hard. Miners followed.
Gold joined silver in the general PM move lower this week, breaking down below all three of its moving averages on high volume. Trader Dan last week opined that gold was likely only holding up because of international concerns, and would probably move down to test 1280 if things calmed down. It looks like his assessment was accurate.
Thursday’s break below 1280 confirmed a pattern of lower highs in gold. That’s bearish.
Silver’s overall price action today was that of a failed rally; at one point silver was up +0.20 but failed to hold its gains, which I consider generally bearish.
Silver’s downtrend remains intact, and gold is now starting to give way as well, having dropped 4 days in a row.
Putin plays chess, the “markets” play Tic-Tac-Toe.
The US is clearly now pushing Russia towards war. But if you read the signs correctly, Russia has been preparing for exactly this outcome for many years.
Out of several reasons that US power brokers specifically — but western power brokers more generally — are deeply unhappy with Russia right now is that Russia is committing a cardinal sin: it is openly, brazenly calling for an end to dollar dominance and has moved aggressively with China to achieve that aim.
No oil-rich country that has tried to move away from the dollar in the past twenty years has managed to do so without being attacked by the US, suffering a regime change, or being ruined by sanctions. In some cases, all three.
Not only has Russia managed to secure a string of heavy-duty bilateral trade and currency swap agreements over the past year, but they’ve done so despite ever-increasing threats and responses from the US and its allies.
And frighteningly, the equity markets in the West are completely ignoring the nested set of risks that accompany these moves and countermoves by two geopolitical heavyweights, which range from punishing trade wars (already underway), to electronic warfare, to an actual shooting war.
Let’s pull back for a moment and look at the Really Big Picture:
We’re facing a future in which the economic growth the world has enjoyed over the past century can no longer continue.
Massive changes to our way of life are in store. No matter where each of us lives.
As the MUCH WATCH video update to the original Crash Course (viewed by over 15 million people) from our friends at Peak Prosperity shows,
The Next 20 Years Will Be Completely Unlike the Last 20:
The next crisis is going to be bigger than the Fed. It is like they build a five foot sea wall and here comes a forty foot tsunami. There is only one clean balance sheet left in the world and that is the IMF. So the only way you are only going to reliquify the world in the next liquidity crisis is by the IMF printing their world money, these Special Drawing Rights or SDRs, and that is going to be the end of the dollar as a global reserve currency.
The problem with the US is that the Treasury and the White House want a weak dollar.
I mean, what good does it do you when your own country wants to trash the currency? What happened to the strong dollar policy? It’s over now and we’re in the currency wars. That is going to lead to a collapse and ultimately we are going to see either gold or the SDRs the new store of value on a worldwide basis.